The taxman has hinted at engaging the Competition Authority to protect consumer interests by ensuring healthy competition in sectors with monopoly tendencies.
Kenya Revenue Authority commissioner-general John Njiraini yesterday said it will liaise with relevant state agencies to promote competitiveness in areas outside of its mandate. This, it said, will ensure smooth transition for businesses and the public into a new regime of the Value Added Tax law.
Prices of basic commodities have risen sharply after the VAT law was effected on Monday, but KRA says presence of competition would stabilise them.
"We will look into whether there are government agencies that need to play a more active role in ensuring that prices of goods are not unjustifiably increased. It is for these reasons that they were established.
"It is the structure of some industries that creates lack of competition hence prices of goods keep going up, with or without imposition of tax," he said.
Njiraini said some industries - such as cement manufacturing and mobile services provision - have remained competitive in pricing despite absence of zero-rating or exemption from taxes.
"Cement prices, for instance, have remained in the range of Sh700 in the past five years despite higher demand from a booming construction sector. Similarly, mobile services are still fairly priced despite VAT and excise duty which is 26 per cent taxation," Njiraini said.
The dairy sector comes across as one where dominance by one processor is emerging as it buys out smaller brands. Brookside Dairies tightened its grip on the market when it acquired Spin-Knit (which makes Tuzo), Ilara Dairies and Delamere Dairies. It is also reportedly in talks to buy a stake in Buzeki (formerly Franklin Bett's Lelkina Dairies) which makes Molo Milk.
"It is a big mistake that the Competition Authority is legitimising Brookside's tendencies. It should be declared a dominant player and asked to shed a stake to other investors," said Stephen Mutoro, the secretary general of the Consumer Federation of Kenya.
"And moving forward there should be cautionary measures for mergers and acquisitions in whatever sectors. CAK is not tackling competition and the winners are not consumers or the government but cartels."
CAK's director-general Wang'ombe Kariuki was unreachable for comment on what it will do in sectors already with tendencies for monopoly.
Processed milk prices have moved up to Sh55 per half-litre this week, a 37.5 per cent from the Sh40 retail prices early in the year.
KRA said the new law will have positive long term effects that will improve the country's business climate. VAT administration, he said, was identified in a World Bank and PwC study as a major impediment in attracting investors into the country.